For decades, the South African Revenue Service (“SARS”) has relied on the “pay now, argue later” rule as a cornerstone of tax administration. This principle permits SARS to collect disputed taxes before the underlying dispute has been resolved, often placing significant financial strain on taxpayers. While the rule serves an important fiscal purpose, it also raises critical questions regarding fairness, proportionality, and the limits of administrative discretion.

The principle is codified in section 164(1) of the Tax Administration Act 28 of 2011 (“the Act”), which provides that a taxpayer’s obligation to pay tax, and SARS’ authority to recover it, are not automatically suspended by the lodging of an objection or appeal. In practical terms, taxpayers are generally required to comply with an assessment even while contesting its validity. The rationale underlying this provision is clear: it safeguards the fiscus against delays and revenue loss arising from protracted dispute-resolution processes.

However, the Act tempers this strict position by granting SARS a discretion in section 164(3) to suspend payment where appropriate. In exercising this discretion, a senior SARS official must consider a range of factors, including whether recovery of the disputed tax is in jeopardy, the taxpayer’s compliance history, the presence of fraud, the risk of irreparable financial hardship, and whether adequate security has been furnished.

It was within this statutory framework that the dispute in Ferreira v Commissioner for the South African Revenue Service (2024/067035) [2026] ZAGPPHC 47 (2 February 2026) (“the Case”) arose. The applicant challenged additional income tax assessments for the 2009 to 2021 tax years, with the disputed liability exceeding R531 million. Pending the resolution of the dispute, the applicant sought a suspension of his payment obligations under section 164.

To support his request, the applicant tendered security in the form of a shareholding in a company whose value exceeded the disputed tax debt. Despite this, SARS refused the request, contending that the proposed security was inadequate and that there remained a risk to the recovery of the debt. The applicant subsequently approached the High Court to review and set aside SARS’ decision under the Promotion of Administrative Justice Act 3 of 2000 (“PAJA”).

The Gauteng Division of the High Court held that SARS’ refusal constituted administrative action reviewable under PAJA. The Court found that the decision lacked a rational connection to the information before SARS and was procedurally unfair. In particular, SARS had failed to meaningfully engage with the adequacy of the security tendered and did not properly weigh the severe financial prejudice the applicant would suffer if compelled to make immediate payment.

As a result, the Court reviewed and set aside SARS’ decision, substituting an order suspending the applicant’s obligation to pay, subject to the provision of the pledged security, pending the finalisation of the tax dispute.

The significance of the judgment lies in its clear affirmation that the “pay now, argue later” rule cannot be applied in a mechanical or arbitrary manner. While SARS has a legitimate and compelling interest in protecting the fiscus, the exercise of its statutory powers must remain rational, reasonable, and procedurally fair.

More broadly, the decision signals an increased likelihood of judicial scrutiny of SARS’ exercise of discretionary powers under section 164. It reinforces the principle that even in the context of revenue collection, where efficiency is paramount, administrative action must comply with constitutional standards of legality and fairness.

Ultimately, the Case contributes meaningfully to the development of administrative justice in South African tax law, underscoring the need to strike a careful balance between efficient revenue collection and the protection of taxpayers’ constitutional rights.


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